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Tax measures related to Coronavirus (update 20200331)

On 24 April 2020 the Dutch government provided further clarification on the measures previously announced to help the Dutch economy and Dutch businesses cope with the expected economic setback caused by the Corona virus. Below we provide you with a summary of those measures and how we can help you to apply these measures in practice. You can find the most recent changes at the top.

LOWERING THE FISCAL SALARY

Directors working via an own limited liability company in which they hold an at least 5% interest (so-called “DGA”) need to report a minimum fiscal salary for Dutch wage tax purposes. The State Secretary has approved that if the company of the DGA faces a lower turnover as result of the Coronavirus measures, this minimum fiscal salary may proportionally be reduced. For this purpose the 2020 turnover is compared to the turnover realized in the same period in 2019. Further  conditions will be announced as soon as possible. Earlier it was already approved that a DGA may assess his minimum fiscal salary only at the end of 2020. Fiscal salary which has already been reported in previous months cannot be reduced.

EXCESSIVE LENDING FROM YOUR OWN COMPANY

New legislation to counter excessive lending by a DGA from his own company was announced earlier to come into effect as per 2022. This legislation seeks to counter a DGA engaging in loan borrowings from his own company in excess of € 500,000 (excluding owner-occupied home acquisition debt). The government has decided to postpone the entry into force of this new legislation to 1 January 2023 to allow a DGA more time to reduce his or her debt due.

MINIMUM HOURS REQUIREMENT

Self-employed business owners can make use of certain tax breaks if they spent a minimum  number of 1225 hours per year on their business activity.

Since self-employed business owners may not be able to meet this minimum hours requirement due to the Coronavirus measures, it has been decided that a self-employed business owner may be deemed to have spent at least 24 hours per week on his business activity during the period 1 March 2020 up to and including 31 May 2020 (regardless of whether these hours have actually been spent).

The choice for 24 hours is logical as this is the weekly average of the annual minimum hours requirement of 1225 hours (rounded up). Where the lower minimum hours requirement applies, the calculation is based on 16 hours per week.

Additional arrangements may be introduced for self-employed business owners active in a seasonal business activity.

WORK RELATED COSTS SCHEME

As of 1 January 2020 the so-called ‘free space’ in the work-related costs scheme includes a two bracket system. The first bracket allows a tax-free benefit to employees of 1.7% of the first € 400,000 of the wage bill. A lower percentage (1.2%) applies to the wage sum in excess of this amount. Due to the Corona crisis the Dutch government decided to increase the first bracket rate (1.7%) to 3% for the year 2020. This will allow employers to grant an additional tax-free benefit to their employees. This is possible during the crisis or thereafter, as long as the benefit is provided during 2020. The maximum increase of the free space of € 5,200 may render a tax saving for the employer of a maximum of € 4,160 in 2020.  

DEFERRAL OF PAYMENT OF MORTGAGE

If a consumer is concerned about his or her ability to meet mortgage obligations as a result of the corona crisis, this may be discussed with the bank / lender. The government has also previously discussed possibilities for banks / lenders to accommodate their clients.

A postponement of payment of mortgage interest / mortgage repayment of six months could have adverse implications impacting the ability to deduct the mortgage interest. the Dutch State Secretary of Finance will issue two decrees with possibilities to avoid such adverse implications.

SET-OFF OF LOSSES – CORONA RESERVE

Dutch corporate income tax losses can be carried back one year and be carried forward six years. A 2020 loss can thus be carried back one year and be set off against 2019 taxable profit, which may result in a tax refund.

If a corporate taxpayer incurs substantial tax losses in 2020 as a result of the Corona crisis, this tax loss can in principle only be offset when filing the 2020 Dutch corporate income tax return. This tax return can be filed only in 2021 and the tax loss compensation (carry back to 2019) is effectuated only when imposing the final Dutch corporate income tax assessment. This may take up to three years.

To facilitate a more timely tax loss compensation, the Dutch government will allow corporate taxpayers to form a fiscal reserve (“Corona reserve”) in their 2019 Dutch corporate income tax return for the expected 2020 loss. This will allow reducing the 2019 taxable profit resulting in a lower taxable amount, and hence, improving the company’s cash flow position. The maximum amount of the Corona reserve is capped at the 2019 taxable profit before applying the reserve. Further details on the conditions for applying this measure are expected to follow shortly.

 

In 31 March 2020, the Dutch government provided further clarification on the measures previously announced to help the Dutch economy and Dutch businesses cope with the expected economic setback caused by the Corona virus. Although there is still a lot of uncertainty, hereafter we provide you with a summary of those measures and how we can help you to apply these measures in practice.

TEMPORARY EMERGENCY MEASURE FOR WORK RETENTION (NOW)

On 31 March 2020, the Dutch government provided more details on the temporary emergency measure for work retention (NOW). It is expected that applications for this scheme can be submitted as of Monday 6 April 2020. These applications must be made online at the website of UWV (Employee Insurance Agency).

Main features of the scheme

Companies that expect at least 20% less turnover during a continuous period of 3 months can apply for a subsidy with the UWV. The amount of the subsidy depends on the loss of turnover and amounts to a maximum of 90% of the wage costs. The UWV pays an advance of 80% of the subsidy requested.

Timeline

1. A company submits an online application for subsidy to UWV (as of 6 April 2020)
2. The UWV will process the request within 3-4 weeks and will start paying the
    advance
3. An advance of 80% of the expected subsidy will be paid in three instalments
4. After 1 June 2020, the company submits actual figures to the UWV
5. The UWV determines the final amount of the subsidy and settles the advance
    payments

Requirements

In order to be eligible for the NOW, the company must:

- Expect a loss of sales of at least 20% in a consecutive period of 3 months starting
   on 1 March, 1 April or 1 May
- Continue to pay wages to employees and not submit applications for resignation
   of employees based on business economic reasons
- Keep the wage bill the same as much as possible
- Inform the Works Council, staff representative body or, if there is none, the
   employees that a subsidy request has been submitted
- File an application with the UWV
- Provide figures on the actual drop in turnover at the end of the subsidy period

(in certain cases to be accompanied by an auditor's report).

Calculation of loss of turnover

For the calculation of the loss of turnover, the company may choose when the 3-month period starts. This can be 1 March, 1 April or 1 May. The turnover of the chosen three-month period in 2020 is compared to the average turnover in 3 months in 2019. The annual turnover in 2019 is divided by 4.

The concept of turnover in this respect is governed by the financial reporting rules included in Dutch civil law. The starting point is the net turnover.

Subsidy amount

The amount of the subsidy depends on the loss of turnover and always amounts to 90% of the percentage of the loss of turnover. So in the event of a complete loss of turnover (100% loss of turnover), the subsidy amounts to 90% of the wage costs. If the loss of turnover is 50%, the subsidy amounts to 45% of the wage costs.

Wage costs calculation

For each eligible company, the advance on the subsidy is calculated on the basis of the wage costs for the month January 2020. The wage per employee is capped at € 9,538 per month. To also take into account the employer's costs (pension premium, employee insurance premium and reservation for holiday allowance), the wage that serves as a basis on which the subsidy is calculated is increased by 30%. The final subsidy is calculated on the basis of the actual wage costs for the months of March, April and May 2020 (this always applies, even if a period of loss of turnover is chosen which starts on 1 April or 1 May).

Group scheme

A group of companies must submit an application for each separate company (one application per payroll tax number). These applications must all relate to the same period of loss of turnover and the loss of turnover must be the same percentage in all applications. The reason for this is that the loss of turnover must be determined at the group level.

Companies that use more than one payroll tax number must also submit more than one application because the application is linked to the payroll tax number.

Payment of the subsidy

After an application has been submitted, the UWV tries to pay out an advance payment of the subsidy within 3-4 weeks. The advance payment is 80% of the expected granted amount. This advance will be paid in three instalments.

Subsequent justification

At the end of the subsidy period, the company must report the actual decrease in turnover to the UWV. The actual wage bill for the months of March, April and May is then also examined. On the basis of this information, the final subsidy is determined and a settlement is made.

Business owners / directors working via an own limited liability company

The NOW provides a subsidy for wage costs for all employees who are insured under the employee insurance schemes. Most business owners that are working via an own limited liability company are not covered under these insurance schemes. No subsidy is granted for the salary of the business owner that is not insured.

International aspects

All employees who are socially insured in the Netherlands count towards the wage costs used to calculate the subsidy. As a result, the wages of posted workers may also be taken into account. Wage costs for employees who are socially insured in another country are not eligible, regardless of whether they live or work in the Netherlands.

ONE-OFF DONATION FOR BUSINESSES WHICH ARE DIRECTLY AFFECTED BY THE GOVERNMENT’S MEASURES CONCERNING THE CORONA VIRUS (“TOGS”)

Since Friday, March 27, the one-off donation of € 4,000 can be applied for with the Netherlands Enterprise Agency (RVO, www.rvo.nl). This is a one-off tax-free gift for companies directly affected by the government measures.

It concerns companies:

- that are forced to close their doors as a result of government intervention;
- which have to close because of the ban on organising meetings and events;
- which are directly affected by the Ministry of Foreign Affairs' negative travel
  advice.

The government measures in relation to the Corona virus may cause certain companies’ turnover to disappear entirely or for the most part. To compensate these companies for their fixed costs and expenses, they can apply for the tax-free donation of € 4,000. This allowance applies per company (Chamber of Commerce registration). If you have several group companies, all of which meet the conditions below, all companies (per Chamber of Commerce registration) can apply for the donation.

Conditions

To be eligible, the company must have the expectation that due to the Corona measures it will during the period 16 March 2020 up to and including 15 June 2020:

- sustain a loss of turnover of at least €4,000, and;
- will have at least €4,000 in fixed costs, also after the use of other support
   measures.

The following conditions also apply:

- On 15 March 2020, the company is registered in the trade register in the
   Netherlands;
- The company has a physical location in the Netherlands;
- The company employs a maximum of 250 people;
- The company isn’t situated at its owner’s home address (specific exception
   for hospitality business);
- On the basis of the registration in the trade register and the related business
   classification, the so-called SBI code, it is examined whether the company
   qualifies for this one-off donation. The following types of enterprise are
   eligible:

     * eating and drinking establishments;
     * cinemas;
     * hair and beauty care: these are hairdressers, pedicures, make-up artists,
        etcetera;
     * travel agents and tour operators;
     * driving school holders;
     * saunas, solariums, swimming pools, fitness centers, sports clubs and sporting
        events;
     * casinos;
     * certain private cultural institutions such as museums, circuses, theatres and
        music schools;
     * shops in non-food sector - please see the updated list

The extensive list of SBI codes can be found at https://www.rvo.nl/subsidie-en-financieringswijzer/tegemoetkoming-schade-covid-19/vastgestelde-sbi-codes. Should you be entitled to TOGS, but be registered under a wrong SBI code, you can report this to the Netherlands Enterprise Agency.

The application can be made until 26 June 2020 via the website rvo.nl/tegemoetkomingcorona.

If, after verification, it turns out that you do not meet the conditions, it is possible for the government to reclaim all or part of the amount. Legal interest will be charged.

 

TEMPORARY BRIDGING SCHEME FOR INDEPENDENT ENTREPRENEURS (“TOZO”)

Since Friday 27 March, self-employed business owners with & without personnel, including in this case business owners / directors working via an own limited liability company in which they own all of the financial and voting interest,  can apply for the Temporary Bridging Scheme for Self-employed Entrepreneurs (TOZO) at the municipality where the entrepreneur resides.

The income support supplements the income up to the social minimum. This social minimum is € 1,050 net per month for singles, and € 1,500 net per month for married couples and cohabitants. When both partners are entrepreneurs, a maximum of € 1,500 will be paid out. This supplement applies for a period of three months, with retroactive effect to 1 March 2020.

You can apply for the support from the municipality where you live. The municipality will request evidence to prove that the support is necessary. For each municipality there are a number of standard documents that you must provide, but all municipalities will implement the regulations independently. As a result, the documents requested may differ per municipality.

Conditions

The following conditions are important for application:

- The company must be registered with the Chamber of Commerce before
   17 March 2020 at 18:45;
- The company’s business is predominantly carried out in the Netherlands;
- The scheme applies to Dutch residents in the age of 18 up to state pension
   retirement age who lawfully live and reside in the Netherlands;
- During 2019 you spent at least 1,225 hours on your business. If you started your
   company less than a year ago, you must have worked in/on your company for at
   least 24 hours per week on average during the period before 1 March 2020.
- The support is intended as a supplement up to social welfare income level. If
   there is a partial drop in income in comparison to social welfare income level,
   the income supplement will be reduced accordingly. If the entrepreneur also
   receives salary income from another employment, which exceeds the social
   welfare income level, the entrepreneur isn’t eligible for this measure.

 

Business owners / directors working via an own limited liability company

This category of business owners can make use of the TOZO as well if the company is unable to pay the business owner’s / director's salary, subject to the same requirements as above, including the hours criterion. This category of business owners are eligible for the TOZO if they hold 50% of the financial interest and voting interest in the company. At the moment it is still not fully clear how the above conditions should be interpreted.

Other remarks

- There will not be an asset wealth test as is customary with social welfare income
   assistance. Also any income of the spouse / partner will not be taken into
   account.
- The TOGS (one-off donation; see above) has no influence on the TOZO;
- As indicated, the TOZO is a net benefit, but it can impact entitlements to certain
   income-related allowances.
- Municipalities will audit in retrospect whether the TOZO has been lawfully applied.
   If an audit reveals that fraud has been committed, the TOZO will be reclaimed
   with penalties.
- The obligation to provide information under the Participation Act applies.

In addition to the TOZO, it is possible to apply for a loan up to a maximum amount of € 10,157 to solve liquidity problems. This loan is granted with a maximum term of three years and an interest rate of 2%, with the first repayment taking place on 1 January 2021.

To check if you are eligible for TOZO you can visit the website www.krijgiktozo.nl

 

SPECIAL DEFERRAL OF PAYMENT

For Dutch personal income tax, corporate income tax, value added tax and wage tax, it is possible to obtain, under conditions, a deferral of payment.

In order to help businesses cope with liquidity problems the Dutch government has decided to grant businesses, on request, a special deferral of payment. Levy of these taxes shall be stopped as soon as a written request for special deferral is received by the Dutch tax authorities. The request will be manually assessed at a later date.

The tax authorities have announced that it is not necessary to provide an expert's opinion for the special three-month postponement.  Should you wish to apply for a longer deferment of payment, you will need to send an expert's opinion.

If you are unable to pay the various taxes and duties, it is important to submit a specific notification with the tax authorities notifying them of your inability to pay. The notification of inability to pay VAT and/or payroll taxes must be submitted within 14 days after the end of the regular payment term. At the moment that you (partially) pay an assessment, you must submit a new notification of inability to pay. It is important to pay close attention to the different deadlines.

If you wish to take advantage of this above postponement, please reach out to your contact at Taxperience. We will then examine the possibilities and, if eligible, submit the request.

 

INTEREST REDUCTION & PAYMENT DEFAULT PENALTY

Tax collection interest and tax levy interest reduced to 0.01% and no payment default penalty imposed.

If an assessment is not paid in time, normally 4% tax collection interest will have to be paid from the moment the payment term has expired. In order to facilitate business owners to easily apply for deferment of payment, the government will temporarily reduce the tax collection interest from 4% to 0.01% as from 23 March 2020 onwards. This rate reduction will apply to all tax debts.

In addition to tax collection interest, tax levy interest is reduced Tax levy interest is charged, for instance, if a tax return is not submitted to the Tax Authorities in time or for an incorrect amount. The rate of tax levy interest is 8% for corporate income tax and 4% for other taxes. In order to accommodate entrepreneurs, the government will also temporarily reduce the tax levy interest rate to 0.01%. The temporary reduction of the tax rate will take effect from 1 June 2020. The only exception is the temporary reduction of the tax levy interest rate for Dutch personal income tax, which will take effect from 1 July 2020.

The Dutch tax authorities indicated that it will not levy any default penalty for non-payment (in time) and to reverse the fines levied. This is in conjunction with the Special Deferral of Payment. Since these requests need to be handled manually, the processing terms may increase. Therefore, we recommend to file a request to the Dutch tax authorities timely and correct in respect of which we are more than happy to assist.

 

REQUEST REDUCTION OF PROVISIONAL ASSESSMENT

Reduction of preliminary personal income tax assessments or corporate income tax assessments is possible

Via preliminary personal income tax assessments and corporate income tax assessments, the Dutch tax authorities levy the expected personal income tax or corporate income tax, in instalments, throughout the year. The preliminary tax payments are subsequently offset against the Dutch tax charge following from the final tax declaration. If a business expects to realize a lower taxable profit as a result of the Corona virus, it is possible to adjust the preliminary personal income tax assessment or corporate income tax assessment. As a result, the tax charge due decreases immediately. The Dutch tax authorities will grant these requests.

Please note that if a tax is due when making the final declaration and this declaration is made after 1 May for Dutch personal income tax or 1 July for Dutch corporate income tax, the Dutch tax authorities may charge interest on the exceeding amount. This interest rate is 4% for Dutch personal income tax and 8% for Dutch corporate income tax. This interest will temporarily be reduced as indicated above.

Taxperience can draft and submit the application for reduction of preliminary personal income tax assessments or corporate income tax assessments for you. Please reach out to your contact person.

 

OTHER MEASURES

In addition to some fiscal measures, other economic measures have also been announced.

Also other measures to counter the adverse economic implications of the Corona virus have been announced by the Dutch government, which include financial support for Q-Credits up to a maximum amount of € 6 million (Q-Credits is a Dutch foundation supporting start-ups and small business enterprises), the expansion of the Guarantee of SME credits, Guarantee of SME – farmers credits, adjustment of the WW premium (unemployment insurance premium).

Finally, it is clearly indicated that additional measures will be taken if necessary.

If you have any questions about these extensions of the arrangements, please call or email us.

 

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